Brazil Stays Put On Rates, Ends 15-Month Easing Cycle

By Reshma Kapadia

Brazil’s Central Bank left interest rates unchanged, ending a 15-month easing cycle, that is seen as helping the economy get back on its feet. Separately, the country’s finance minister Guido Mantega said Brazil’s economy is expected to have grown at an annualized rate of 4% or more in the third quarter and likely to maintain this pace into next year and 2014, the Financial Times’ Joe Leahy reports. (Most economists expect the economy to grow at just 1.5% this year before moving back to a rate of about 4%)

Nomura’s head of emerging markets research Tony Volpon writes:

“We still believe the combination of monetary, fiscal and now easing-through-weaker-Brazilian real is creating powerful drivers that will increase demand, despite well-known problems in the transmission mechanism given issues around credit markets. Unfortunately, given a series of supply-side constraints, especially still very tight labor markets, this demand impulse will lead to more inflation than growth. While one-off tariff cuts will keep headline inflation looking relatively well behaved, inflation pressures will continue to build, and we believe that even taking into account the positive contribution of tariff cuts, we will see inflation drift towards 6% next year.”

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.